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The lease-based model of supported housing – Charity Commission view

The supported housing sector is a space where many aspects of civil society come together to meet the needs of vulnerable people. Although supported housing can be provided by local authorities, housing associations and private landlords, in many cases supported housing is provided by charities.

Charities are therefore an important part of the supported housing sector, helping their beneficiaries access specialised accommodation and support services to ensure their needs are met.

As for all charities which provide services, particularly for vulnerable people, trustees need to be aware of and attentive to risks to both their beneficiaries or their charity. Having identified potential challenges in the supported housing sector, the Charity Commission wishes to make trustees of charities which provide supported housing aware of the risks associated with providing accommodation via the lease-based model.

Supported housing and lease-based model defined

Supported housing is accommodation provided alongside support, supervision, or care to help people live as independently as possible in the community. Examples of supported housing may include group homes, hostels, refuges, supported living complexes and sheltered housing.

Increasingly, the Commission is becoming aware of charities providing this type of accommodation via the lease-based model. This is where a charity does not own the properties through which it provides accommodation but instead holds lease agreements with an individual or entity such as an investor or property developer.

In some instances, a charity may even sell property that it owns to a third party and then lease the property back from that third party so that it can provide accommodation.

The key risks associated with the lease-based model

The lease based model of providing supported housing presents a number of potential risks which you, as a trustee of a charity providing supported accommodation, need to consider before making such an arrangement, and/or manage once entered into. These risks include:

taking on obligations that are difficult or impossible to meet – as trustees you need to ensure you have the appropriate resources, knowledge, and skills to fully understand and manage the risks of entering into complicated contractual property agreements. If there are any doubts about this, you should seek professional advice before entering into a contract. The Commission has seen cases where trustees may not have fully understood the implications of the lease terms and consequently have taken on obligations that are difficult or impossible to meet, for example repairs and upkeep of the property obligations or increases in lease payments having insufficient income to meet the terms of the lease – as trustees you should carefully consider the risks of entering into long term contracts and whether you are confident that you will have sufficient income, over the full term of the lease, to cover all future costs. The Commission has seen cases where charities have entered into high-cost leases over a long period, sometimes up to 25 years. During this time, the charity has run into financial difficulty and been unable to meet the terms of the lease. Much of the income of supported housing providers is derived from Housing Benefit which has complex rules that can change without warning. As a trustee, you should consider whether your charity could meet the costs of a lease if the income from Housing Benefit dropped significantly because of a change in the rules or a failure to qualify conflicts of interest – as trustees you must manage any potential conflicts of interest appropriately. The Commission has seen cases where trustees of supported housing charities are in receipt of personal benefits from the charity. These scenarios raised questions about trustees’ ability to make decisions based only on what is best for the charity. Such conflicts need to be managed properly and cautiously. In instances where the Commission has evidence of trustees receiving unauthorised benefits from a charity it takes action. This can include requiring trustees to return the value of a benefit to the charity rapid growth of operations – the Commission has seen cases where charities have grown rapidly after they have adopted the lease-based model and they have had difficulties adapting to this change. As trustees you need to ensure you have sufficient standards and procedures in place to meet the needs of your beneficiaries and your legal obligations as the charity’s provision of accommodation grows

Commission guidance

As the regulator of charities, a key part of our role is to alert the sector to emerging risks so that trustees can take the appropriate action. Although the Commission urges charities to be mindful of these risks, we accept that, in certain circumstances, the lease-based model of providing supported housing can allow charities to provide services to a greater number of beneficiaries.

In such circumstances, we expect that you, as trustees and charity leaders, will have considered the following guidance and ensure you discharge your duties:

trustee guidance on decision making – trustees must always follow this guidance, making sure all decision-making and risk assessment is also properly recorded trustee guidance on conflicts of interest – trustees must ensure that any conflicts of interest are properly managed in line with this guidance trustee guidance on trustee payments – trustee payments must only be made when appropriate and in line with this guidance links to non-charities – trustees should be mindful of the risks associated with working with non-charities and must manage these risks in line with this guidance risk management – trustees should regularly review and assess the risks faced by their charity in all areas of its work and plan for the management of those risks

Alongside understanding, and following, the above guidance, trustees must assess the risks associated with the lease-based model to their charity, taking appropriate advice where necessary. Fulfilling these duties will help you ensure that you charity can thrive, delivering positive outcomes for your beneficiaries.

https://charitycommission.blog.gov.uk/2023/11/20/the-lease-based-model-of-supported-housing-charity-commission-view/

seen at 16:45, 20 November in Charity Commission.
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